Overview: Orient Refractories Limited Overview: Orient Refractories Limited Orient Refractories Ltd

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Transcript of Overview: Orient Refractories Limited Overview: Orient Refractories Limited Orient Refractories Ltd

  • Overview: Orient Refractories Limited Orient Refractories Ltd. (ORL), a part of RHI AG group; is primarily engaged in manufacturing, production and distribution of Refractories, Monolithics and Ceramic Paper and has a manufacturing facility in Bhiwadi (Rajasthan). ORL is the market leader for Special Refractories in India and is a global partner for over 600 customers in India and across the world. Refractory material is used to provide thermal insulating lining in Furnaces, Kilns, Reactors, etc. It is mainly used in the Iron & Steel industry, Metal Smelters, Cement, Glass Industries, etc.

    Investment Rationale RHI AG’s supply chain aids supply network RHI AG (the parent of ORL and global leader in refractories) is the second largest global supplier of molten getting metal flow engineering and complete refractory solutions. Being associated and supported by one of the largest global players, ORL’s customer base and sales network has increased. Moreover, it demonstrated double digit export revenue growth (17.72% CAGR over FY2012- 2017) trajectory. Industry leading margins Due to parent’s support and passing off the inflated cost of raw materials, ORL has been able to sustain its margins. It enjoys leading margins as compared to its peers and other global leaders. Benefit from Steel Demand in India Steel sector is one of the most crucial sectors for the economic and industrial development of any nation. With new government initiatives and focus on infrastructure development, refractories’ sector will directly get benefitted from the growth of steel industry. Zero-debt & healthy balance sheet ORL has turned down to virtually zero-debt company. It has maintained its consistency in working capital cycle since years. And, it has been able to generate free cash flow every year.

    Sector Sensex / Nifty CMP Recommended Target Price Time Horizon

    Refractories & Monolithics 35,934.72 / 10,852.90 180.10 “BUY” 220 12 Months

    Stock Details

    BSE Code 534076

    NSE Code ORIENTREF

    Face Value (Rs.) 1.00

    Market Cap (Rs. Cr.) 2,163.71

    Book Value 26.87

    CMP (Rs.) 180.10

    EPS (Rs.) 7.15

    P/E (x) 22.25

    Beta (12M) 0.88

    52W H/L 194.90/126.55

    Shareholding Pattern % holding

    Promoter & Promoter group 69.62%

    DII / FI/ MF 5.23%

    FPI 5.13%

    Public & Others 20.02%

    9th June, 2018

  • Company Background Orient Abrasives Limited (OAL) incorporated in 1974 by Rajgarhia group of industries as a venture to manufacture Abrasives grains, Refractories & Monolithics and Power. ORL was incorporated in November 26, 2010 as a subsidiary when OAL decided to demerge its refractory division with a view to de-risk and segregate the refractory business from the other two businesses. The refractory undertaking was transferred with effect from April 1, 2011. In 2013, Rajgarhia group entered into share purchase agreement for sale of stake of 43.62% with M/s. Dutch US Holdings B.V. Netherlands, an entity wholly owned subsidiary of M/s. RHI AG, Austria and a part of M/s. RHI group (Ranks 2nd on global level in refractory business). Presently, RHI group holds 69.62% stake in ORL.

    Brief Profile of the Company Orient Refractories Limited, headquartered in Delhi, is in the business of Manufacturing and Marketing Special Refractory Products, Systems and Services to various industries with its global presence. Refractory products are the substances that can withstand high ranges of temperature of over 500° C and is produced from non-metallic minerals. It protects furnaces against thermal, mechanical and chemical stress. They are mainly used in production plants of metals, glass and lime where very high temperatures are required in the furnaces to melt metals and other elements.

    ORL provides a wide range of special refractories and monolithics to meet the needs of the iron and steel industry. The wide range of products includes Isostatically Pressed Continuous Casting Refractories, Slide Gate Plates, Nozzles and Well Blocks, Tundish Nozzles, Bottom Purging Refractories and Top Purging Lances, Castables, Slag Arresting Darts, Basic Spray Mass, etc, which are custom made to suit the casting conditions and grade of steel being cast.

    ORL customers are the complete spectrum of steel producers in India from the large domestic integrated steel producers to the small mini steel plants that include Steel Authority of India, Mukund Steel, Tata Iron and Steel Company, RINL – Vizag, Sunflag Iron, Lloyd Steel, Usha Martin and the Jindal Group. It also manufactures a wide range of slide gate plate refractories for various international systems including Flocon, Interstop (including LS Series), Vesuvius (including LV Series), Saflow and Sanac. With close to 300 small to medium sized iron and steel producing Indian companies as customers, ORL is a preferred vendor for a large number of steel producers in the country. The company also has a significant presence in the global market place and exports a fair share of output to various overseas customers in Germany, France, Spain, Turkey, Egypt, Indonesia, Saudi Arabia, Thailand, UAE and Greece.

    ORL has the distinction of being ISO - 9001 quality certified. Its manufacturing facility is located in Bhiwadi, Rajasthan which began its commercial production in 1986. This facility is spread over 27 acres of land. It also has an allied plant based in Salem, Tamilnadu for manufacturing monolithic and basic spray mass. The refractory facility is divided into 3 independent sub-divisions one each for the manufacture of slide gate plates, continuous casting refractories and castables and pre-cast shapes. The division currently produces more than 70,000 pieces of slide gate plate, 30,000 pieces of Continuous Casting Refractory products and over 2,000 tons of castables and mortars on a monthly basis. It produces more than 40,000 tons of refractory per annum customized products and system solutions.

    The current production capacity of Isostatic Pressed Products (ISO) at Bhiwadi plant is 9,300 tons per annum and works at 90% utilization capacity. Considering the growth of steel industry in India and growing demand of refractory worldwide, the expansion was carried out of ISO production capacity to 11,700 tons per year at Bhiwadi. The plant has been successfully commissioned on 17 May, 2018 and the commercial production will start from June 2018.

    Customers:

  • Products

    Isostatically pressed Continuous Casting Refractories Tundish Nozzles

    Slide Gate Plates Slag Arresting Darts

    Castables Nozzles & Well Block

  • Management

    Mr. Parmod Sagar (Managing Director & CEO): He started his career in casting department of a Steel plant and continued to work there till 1992. He joined Orient Abrasives Limited on 15 April, 1992 as a Marketing Manager. He has vastly contributed in successfully implementation of various projects and in their growth. His technical expertise, industry experience and marketing knowledge have immensely helped the Company in production, maintenance and market development. He has over 34 years of experience.

    Vijay Sharma (Chairman): Dr. Sharma was previously employed as Executive Director by Usha Martin Ltd. and Chief Executive Officer & Managing Director by JSW Steel Ltd. He joined the company in 2014.

    Sanjeev Bhardwaj (Chief Financial Officer): He is a Chartered Accountant and Company Secretary by profession. Previously, he worked as a Vice President of Sterling Tools Limited. He is associated with the company since 2013 and has an experience of 29 years in this industry.

    Overview of Industry

    Refractory Industry The growth of global refractories market is fueled by the high potential of non-metallic minerals industry, increasing global demand for high grades of refractories, and increasing infrastructure development in emerging economies. Asia-Pacific is the global forerunner in refractories market, in terms of value and volume, and the trend is expected to continue till 2020. The countries in this region such as China and India are the fastest-growing markets for refractories due to increasing usage of refractories in iron & steel, cement, glass, non-ferrous metals, and other industries. The steel industry is one of the biggest consumers of refractory products, accounting for nearly 60-70% of the total production.

    Global refractories market is expected to reach USD 40,007.33 million by 2025, from USD 29,518.47 million in 2017, at a CAGR of 4% in the forecast period 2018 to 2025 (source: ResearchAndMarkets.com).

    The Rs. 6,500 cr. Indian refractory industry is expected to witness 7-8% uptick in demand, given pick up in infrastructure projects, leading to increased production of steel and cement.

    (Source: IRMA)

  • Refractories consumption by Key industries

    (Source: RHIMagnesita)

    Steel Industry India became the 3rd largest steel producer in the world in 2015 and is on track to emerge as the 2nd largest producer after China. Government program aims to reach 300 MT of steel production capacity by 2030 i.e. triple of 2016. This new policy envisages increased per capita steel consumption of 160 kgs by 2030 from present level of 60 kgs and increased demand for high automotive steel, electrical steel and special steels, improvement of productivity in MSME stee